PERSPECTIVE: Recessionary fears must not rock client faith in the industry

Thanks to Larry 'ample arse' Barker and Peter 'whinging prick'

Souter - rival Omnicom mudslingers - for providing the Diary page levity

in a week where worries over the economy run like a thread through the

business.



But where to start with the doom and gloom? How about WPP's share price

dropping 56p on Tuesday, the Bcom3 Group deciding against a flotation

this year, more layoffs at US agencies, the upcoming election and

foot-and-mouth sparking spending jitters among UK clients, ITV reporting

falling ad revenues. How should agencies react?



First, you could make the case that the recession is more psychological

than real. The roaring American economy has been weakened but it is not

technically in recession (defined as two consecutive quarters of falling

output). Far from spending paralysis in the UK, it turns out that there

are several sectors where adspend has been growing in the past three

months relative to the same period last year. For example, finance is

growing at 33 per cent, ahead of 2000's 27 per cent. Adspend for

business and industrial advertisers (utilities, telecoms, etc) is up 15

per cent, a nudge up from 2000's 14 per cent. Travel is up 7 per cent

rather than down 4 per cent.



Second, thanks to the IPA's body of Advertising Effectiveness case

studies, and to its more recent collaboration with the benchmarking

specialist PIMS Associates, agencies have ample evidence of the

long-term value of advertising to brandish in the face of the most

jittery client. BMW, Andrex, Gold Blend, PG Tips, they are all

there.



Looking at how companies have behaved towards advertising during a

recession, PIMS examined the profitability of 183 UK companies which had

experienced general or industry-specific recession, grouping them by

whether they had cut or increased their adspend.



The results showed that 110 of the companies chose to cut adspend in a

recession, 53 to maintain it and only 20 to increase it. But those

businesses that increased adspend were more profitable during recession

than those that had cut or maintained it. Once recovery had started,

businesses that had maintained or increased adspend made the fastest

profit improvement.



And those that increased adspend increased their market share faster

during recovery than those that did not - nearly three times as fast as

the advertising cutters.



A cynic might add here that upcheering IPA reports are all well and good

but chief executives everywhere live and die by their quarterly earnings

and that is what Wall Street and City analysts measure them by as they

talk down the share price. A slowing economy turns clients into

quarter-to-quarter worriers rather than long-term thinkers and

advertising is going to have to shout louder than ever to make its voice

heard in boardrooms.



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